Sales in March 2023 were down 2.4% month over month and still down 22.0% year over year according to the NAR Housing Snapshot.  The median sales price dipped 0.9% to $375,700 and there are 2.6 months supply of homes on the market compared to 2 months a year ago.

“Inventory levels are still at historic lows, and consequently, multiple offers are returning on 28% of properties.” According to Lawrence Yun, Chief Economist for the National Association of REALTORS®.

It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.  The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation.

Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.  Include the written pre-approval letter along with the offer.  When you are making an offer on a home, have the mortgage professional available to reassure the listing agent by phone who will convey assurance to the seller.

If you’re concerned about multiple offers, make your best offer first because you may not get to counter and simply lose out to another buyer.  Starting with a low offer and gradually coming up doesn’t work in highly competitive situations.  In some cases, a low-ball offer could cast a pall on any consideration of your purchase contract altogether.

The listing agent will calculate the expenses on the different offers for the seller to show them what their net proceeds will be on each contract.  Some types of financing have more costs incurred to the seller.  Asking the seller to make repairs or other financial concessions could lower their net even though your offer may be higher.

From a buyer’s standpoint, contingencies provide options for things that may be uncertain like qualifying for a mortgage, discovery of major impediments to the condition of the home, and other things.  To the seller, they are obstacles that may invalidate the contract causing the home to go back on the market.  If the contingencies are necessary, try to make them as palatable to the seller as possible.

Instead of waiving your rights to make inspections, consider a very short inspection period to minimize the time the property is in limbo.  Instead of asking for repairs, provide a simple “accept or reject” once the inspections have been made.

Try to accommodate the seller’s desired closing and possession dates.  Sometimes an earlier date may be more desirable for a seller and other times, it might be a later date based on the home they’ll be moving into.  Your agent can do some research and find a flexible alternative that may appeal to the seller.

Increase your earnest money deposit more than the minimum.  It is a pecuniary indication that you are serious.  Your agent can tell you what the amount should be and alternatives like increasing the earnest money after certain contingencies have been met.

Escalation clauses state that you are willing to increase your offer by a certain amount up to a specified maximum, subject to another bona fide offer being received before yours is accepted.  Your agent will be able to further explain how these might work in your situation as well as share their experience with them in other similar negotiations.

You as a buyer and your offer to purchase need to be seen as the solution to the seller’s situation in price, terms, and reliability to close.  Working with an experienced agent with seasoned negotiation skills is key to your success in buying a home in a competitive environment.

Builders of new homes offer or are required to warrant their work for a specified period.  Municipal inspections are generally required during different stages to “ensure the life, health, safety, and welfare of the public” but even if something is missed, the ultimate responsibility for building to code belongs to the builder, even if the municipal inspector misses something.

There are four basic stages of residential construction including:

1. The foundation stage begins with excavation, footings, foundation walls or slab, waterproofing, backfill, compaction and underground rough plumbing and electricity.  Municipal inspections are done prior to pouring the foundation while items are visible.
2. The framing stage includes the wood or steel framing, exterior walls and roof sheathing, exterior trim and siding, windows, doors, and roofing.  Depending on the municipality, there could be inspections of the rough framing separate from the roofing.
   Next in this stage comes rough plumbing including water, waste, and vent piping, rough electrical, rough mechanical, ductwork, wiring, and electrical panel installation.  Municipalities will usually inspect plumbing and electrical separately.
3. The wall insulation and drywall installation are done and inspected depending on the municipality before tape and texturing are done.
4. The final stage of construction includes flooring, cabinets, millwork, countertops, tile, mirrors, electrical trim, plumbing trim, and mechanical.  Some builders will not install appliances and HVAC until the last stage to protect against theft.  Municipal inspections are made in the final electric, plumbing, and mechanical.

A “Final Inspection” is done after all the periodic inspections have been completed and passed.

Defects that manifest themselves during the warranty period are the responsibility of the builder.  Unfortunately, some things may go undetected until after the warranty expires leaving the repair expense as the sole burden of the buyer/owner.

A safeguard that the purchaser will not be out of pocket for repair expenses is a home warranty which shifts the liability to the warranty or service contract company.  This is a negotiable item that can be paid for by the builder or the buyer.  However, this warranty will have a time limit on it and to continue the coverage, the buyer/owner will have to renew it by paying the additional annual premium.

One more safeguard for the purchaser is to hire their own inspector, to conduct periodic inspections during the different phases of construction.  Unlike an inspection made on an existing home, the inspector will have to visit the site multiple times during the process.  For that reason, constructions inspections are more expensive.

When hiring an inspector for new construction, ask at what stages do they inspect.  A typical new construction inspection might be at the end of the foundation stage, another at the end of the framing and rough plumbing, electrical, and mechanical, and the final inspection after the home is completed.

A provision allowing a buyer to hire their own inspector for periodic inspections should be included in the sales contract.  Your agent can not only help you get that included but assist in negotiation of any issues that arise because of the periodic inspections.

If you value this extra level of protection in the purchase of a new home, it is important that you have your agent first accompany you to the models so they will be registered as your agent.

There are fees and expenses associated with mortgages that must be paid by the closing date for closing costs, and pre-paid items, in addition to the down payment.  These amounts can vary according to the type of loan, mortgage company, customary practices of the area, and the terms of the contact.

According to Freddie Mac, the amounts could vary between 2-5% which is considerable.  Most buyers want a more specific number and that can depend on the conditions mentioned previously.

For buyers, the largest amounts are loan origination fees which is usually one percent of the amount borrower, points paid by buyer which are one percent or more of the mortgage amount, owner’s title policy if paid by the buyer, and the pre-paid items mentioned above.

Certain types of mortgages allow the seller to pay specific closing costs for the buyer with full disclosure in the sales contract.  For example, all the buyers’ closing costs can be paid by the seller for VA mortgages up to 4% of the sales price.  FHA and USDA allow sellers to pay up to 6% of the sales price to be used for closing costs and pre-paid items.

For conventional loans, underwritten by Fannie Mae or Freddie Mac, sellers can contribute up to 3% if the down payment is less than 10% and up to 6% if the down payment is 10-25%.

Asking a seller to pay a buyer’s closing costs is tantamount to lowering the price of the home.  In a highly competitive market, the seller may be less willing to pay a buyer’s closing cost than in a soft market.

Settlement dates affect the amount of pre-paid interest.  Mortgage interest is paid in arrears, after the money has been used.  The principal and interest portion of the payment is allocated to pay for the interest on the principal balance for the previous month and the remainder is applied to reduce the principal of the loan.  Each succeeding payment has less going to interest and more going to principal until the loan is fully retired.

When a buyer closes on the sale of a home, the first payment will not be due until first of the month following the next full month after closing.  The buyer is also responsible for interest from the funding date, usually at closing.  This amount is usually reflected on the buyer’s closing statement, as interest to the end of the month.  It pre-pays the interest from closing until the next first of the month.

If the buyer closed on the 2^nd of the month, the pre-paid interest would be far greater than if the buyer had closed on the last day of the month.  To minimize this out of pocket expense, many times closings will be scheduled toward the end of the month.

Another large buyer’s closing cost is property insurance.  The lender will require that the home be insured for at least the amount of the mortgage being borrowed.  Insurance must be paid for in advance, usually at closing.  In addition to the annual premium, the lender may require an escrow account be established to collect 1/12 of the annual property taxes and property insurance to be paid with the payment so there is enough money in the account to pay them when they are due.

When setting up the account, the lender may require an additional two months of reserves for the insurance to be renewed in advance of the policy expiring.

The amount of reserves for the taxes depends on when the taxes must be paid.  At closing, the seller will credit the buyer with the amount of taxes from January 1 to the closing date since taxes are also paid in arrears.  The lender will probably have the buyer pay two to three months’ taxes additionally at closing so the tax bill can also be paid before it is due.  Some states give the taxpayer a discount for paying them in advance.

Your real estate agent will be able to give you an estimate of closing costs that should prepare you to purchase a home.  The lender is required by law to supply you with a Loan Estimate within three days of receiving your loan application.

A Closing Disclosure will provide the final details of the mortgage loan you have selected.  It includes loan terms, estimated monthly payment, and the fees and other costs incurred with the mortgage.  You must receive it three business days before you close on the mortgage loan so that you can compare it with the Loan Estimate.

Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot.  The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago.

“Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties.” According to Lawrence Yun, Chief Economist for the National Association of REALTORS®.

It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.  The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation.

Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.  Include the written pre-approval letter along with the offer.  When you are making an offer on a home, have the mortgage professional available to reassure the listing agent by phone who will convey that to the seller.

If you’re concerned about multiple offers, make your best offer first because you may not get to counter and simply lose out to another buyer.  Starting with a low offer and gradually coming up doesn’t work in highly competitive situations.  In some cases, a low-ball offer could cast a pall on any consideration of your purchase contract altogether.

The listing agent will calculate the expenses on the different offers for the seller to show them what their net proceeds will be on each contract.  Some types of financing have more costs incurred to the seller.  Asking the seller to make repairs or other financial concessions could lower their net even though your offer may be higher.

From a buyer’s standpoint, contingencies provide options for things that may be uncertain like qualifying for a mortgage, discovery of major impediments to the condition of the home, and other things.  To the seller, they are obstacles that may invalidate the contract causing the home back on the market.  If the contingencies are necessary, try to make them as palatable to the seller as possible.

Instead of waiving your rights to make inspections, consider a very short inspection period to minimize the time the property is in limbo.  Instead of asking for repairs, provide a simple “accept or reject” once the inspections have been made.

Try to accommodate the seller’s desired closing and possession dates.  Sometimes an earlier date may be more desirable for a seller and other times, it might be a later date based on the home they’ll be moving into.  Your agent can do some research and find a flexible alternative that may appeal to the seller.

Increase your earnest money deposit more than the minimum.  It is a pecuniary indication that you are serious.  Your agent can tell you what that amount should be and alternatives like increasing the earnest money after certain contingencies have been met.

Escalation clauses state that you are willing to increase your offer by a certain amount up to a specified maximum, subject to another bona fide offer being received before yours is accepted.  Your agent will be able to further explain how these might work in your situation as well as share their experience with them in other similar negotiations.

You as a buyer and your offer to purchase need to be seen as the solution to the seller’s situation in price, terms, and reliability to close.  Working with an experienced agent with seasoned negotiation skills is key to your success in buying a home in a competitive environment.   Download our Buyers Guide.